AMSTERDAM, Oct 27 (Reuters) - Shares in Dutch bancassurer ING Group NV plunged for a second day on Tuesday, as analysts said a pending 7.5 billion euro rights issue was likely to come with up to 50 percent dilution for current shareholders.
ING's struggles rippled across the European banking sector, weighing on shares of other state-aided banks such as Royal Bank of Scotland, Lloyds Banking Group and KBC Group.
ING shares were down as much as 14 percent before rebounding and were off 8.6 percent at 8.74 euros by 0913 GMT. That followed a decline of 18 percent on Monday.
The stock has lost more than 6 billion euros in market value since Friday's close.
ING said on Monday it would split in two, repay some of its Dutch state aid early and launch the massive rights issue, all part of its restructuring talks with the European Union.
Analysts have questioned the reasoning for the rights issue and cut their price targets substantially.
KBC Securities analyst Dirk Peeters, in a note Tuesday, estimated the rights issue would be done at a range of 7.5 euros to 8.5 euros per share, indicating dilution of 45 percent to 50 percent and an increase in outstanding shares to 3 billion.
KBC set a price target of 8 euros per share for the stock, at the low end of the range of new targets analysts have set since Monday.
Cheuvreux and Keijser Capital downgraded the stock and UBS removed it from the firm's European "key calls" list.
"We note that the share issue is expected to be below current book value and as yet we do not have a complete picture of future net income on existing businesses," Keijser analyst Nico van Geest says in a research note. (Reporting by Ben Berkowitz; Editing by Jon Loades-Carter)